Time runs out for NorthBay

Strategy of relative value investing has taken another knock

By

William Hutchings

January 30, 2006 5:00 pm GMT

The decision by NorthBay Investment Management, the London hedge fund manager, to wind up its business this month is another blow to the controversial strategy of relative value investing. It also highlighted the financial struggle that many smaller hedge fund managers are facing as the industry matures.

Many economists who believe in the efficient market hypothesis dislike relative value investing more than any other. It relies on exploiting price differences between closely-related securities, such as two government bonds...